I'll Try Again... Golf's Solution: More Golfers. Here's a Sad Story
This is about the death of a formerly flourishing Sarasota, Florida golf course. In 1997 it was one of the best golf course businesses in Florida.
It starved to death.
The truth is: Today thousands of golf courses in the USA are starving. I mean they are starving for golf players.
Statistics available on the Internet indicate that there were 12,400 golf courses in the US in 1990 with an estimated 24.2 million regularly playing golfers. That amounted to 1,952 golfers per golf course. In 2016 there were 15,500 golf courses and 24.1 million golfers, or 1,555 players per golf course – 397 fewer than in 1990. (http://golf-info-guide.com/golf-tips/golf-in-the-usa/by-the-numbers-usa-golfers-and-golf-courses/)
If golfers played, say twice a month, 24 rounds a year, the 12,400 golf courses in 1990 averaged, 1,952 X 24 = 46,848 rounds per 18 holes. In 2016, the 15,500 golf courses are sharing 1,555 X 24 = 37,320 per 18-holes per year.
It was my experience managing a Sarasota 27-hole golf course in 1997 that our 70,000+ rounds more or less reflected the 46,848 annual rounds per 18-holes over 27-holes - 46,848 X 1.5 = 70,272. Gross receipts in 1997 were $2.2 million (rounded), average income per round, $31.31 - $2.2 million / 70,272 = $31.31- on total operational expenses including cost of sales of total, $1.4 million. Average expense per round played in 1997, $19.92 - $1.4 million / 70,272 = $19.92.
I called 1997 the last ‘good’ year in the golf course industry in the USA. I saw it coming because I knew growth in participation had plateaued while an outrageous number of golf courses (probably over 3,000) were under construction or on the drawing board.
Fast forward to 2016. The Sarasota golf course share of 18-hole rounds (37,320 per 18-holes) would have been down to 55,980 (27-hole equivalent), a drop of 14,292 rounds since 1997. But it gets worse.
Operational expenses in 2016 will have risen to over $1.8 million, while revenue would have been forecast to fall dramatically to under $1.4 million. Revenues were forecast to fall even more than a simple percentage basis because average green fees will have dropped as much as 30% from what they were in 1997. The reason fee dropped: Under pressure to attract golf players in an overstocked marketplace, the average income per round in 1997 of $31.31, was forecast to drop to $21.92 in 2016 (However, for this example, I bullishly increased the 2016 per-round amount to an even $25.00). Therefore, Sarasota’s 55,980 rounds in 2016 may have generated, 55,980 X $25.00 = $1,399,500 total revenue.
Total revenue includes membership fees, green fees, cart fees, practice range sales, food and beverage sales, and pro shop merchandise sales.
“The Bureau of Labor Statistics keeps track of annual inflation rates and is a great resource for comparing today's prices to those of yesteryear. A metric called the Consumer Price Index is especially useful. This metric measures the average price change over time of all consumer products purchased in urban areas, comprising approximately 87% of the U.S. population. While not exactly a cost of living index, the CPI is an excellent indicator of inflation and is widely used to inform public policy and legislative changes in programs such as Social Security. The BLS also makes available an inflation calculator to find out how much inflation has degraded the dollar during a certain period. For example, according to the most recent data collected by the BLS, current as of August 2014, what would have cost $20 in 1994 would now cost over $32.” (http://www.investopedia.com/ask/answers/101314/what-does-current-cost-living-compare-20-years-ago.asp).
For these purposes, let’s move to 1997 and adjust the $32 in 1994 to $30 in 1997. Then the average cost of everything between 1997 and 2016 went up from $20 to $30 or 50% (but I adjusted the increase down to 33%).
So, back to the Sarasota 27-hole golf course. In 1997 it hosted over 70,000 rounds (rounded) with $2.2 million gross receipts (rounded) on $1.4 million in expenses (rounded). Net operating income (NOI) in 1997 was $800,000 (rounded).
IT WOULD HAVE BEEN A DISASTER IN 2016
In 2016, projected rounds on a ‘fair-share’ basis were 55,980 at average income per round of $25.00 (average blends summer, winter, 18-hole, and 9-hole round fees, plus concession sales), or total sales of 55,980 X $25.00 = $1,399,500. However, operating expenses have increased 33% since 1997 to $1,862,000 - $1.4 million X 1.33% = $1,862,000 (I know it says 50% increase above, but in '97 I was in the process of correcting several operational outflow problems that would have improved efficiency substantially by 2016). Therefore, projected losses for a cash flow winner of $800,000 profit in 1997 completely flips to a loss of $462,500 in 2016. That’s a wrong-way swing of $1,262,500 since 1997.
So the Sarasota golf course, once a fat cat enjoying plenty of rounds at solid prices and an $800,000 bottom line in 1997 was now forecast to be under water in 2016. It was starving for golf players. What's worse. Even the players they can attract are paying far less to play. Meanwhile, expenses have gone up 33% (possibly up to 50%) since the 1997 grand ole' days. The result winds up as a projected negative cash flow loss of $462,500. A long way from an $800,000 profit - a turnaround of over $1 ¼ million since 1997.
Let’s face it. The Florida 27-hole golf course has 397 fewer golfers per 18-holes in 2016 compared to 1997 - or 595.5 fewer per its 27-holes. There are simply not enough golfers in 2016 to support the 15,500 golf courses in the USA.
So. Could the Sarasota 27-hole golf course be saved?
Not without more golfers.
The Sarasota golf course closed its doors five years ago. The land has completely overgrown. It will cost at least $2 million to reopen just 18-holes the original 27. The clubhouse, empty and severely vandalized, may need to be torn down and replaced. Add another $1 million. Without the missing 397 golfers, I cannot envision a future for the Sarasota golf course.
Keep in mind, this is only one golf course. There are over 15,500 golf courses in the USA, many looking at the same fate. I repeat: There are simply not enough people playing golf to support 15,500 golf courses - period!
I’m not getting anywhere with my postings about golf’s current crisis and how to easy it can be to correct it. With the absurd notion that golf’s shortage of golf rounds can be overcome by requiring those who play golf to play more, I see no light at the end of the tunnel (it's golfers running the industry).
There are 10 million people out there who would try the game if invited.
I have received all kinds of positive feedback about my posting about the 10 million out there who would give golf a try. Comments generally come from people who aren’t golf’s mover and shakers - but many are PGA members. Their comments to me are 100% supportive.
I hope everyone who reads this posting will encourage anyone they know with an interest in the future of golf to read this posting.
Here's a suggestion: If you play golf. How about finding someone you know who does not play golf and invite them to join you and give the game a try. Take them to a range or just invite them to ride around the golf course with you while you play. That's more or less how golf grew in the 50s, 60s, and 70s (really).
Mike 941-739-3990 Email: email@example.com